CURVES HOLDINGS Co., Ltd. (7085) Earnings Call Transcript & Summary

My name is Takeshi Masumoto, Representative Director, President and Group CEO of CURVES HOLDINGS. Thank you for taking the time off your busy schedules to attend today's presentation covering the company's consolidated results of operations for the second quarter of the fiscal year ending August 31, 2025. I'll try to keep my presentation brief to make sure we can field as many questions from stakeholders as possible. Today's presentation will follow the order outlined in the presentation materials. We will be covering the agenda items shown here. First is the results summary for the first half of the fiscal year ending August 2025. Total club membership stood at 828,000. This corresponds to a net increase of 11,000 compared to the end of the previous fiscal year and a net year-on-year growth of 46,000 compared to the same period last fiscal year. We registered a net growth of 5 clubs compared to the end of the previous fiscal year, bringing the club count to 1,983. This figure refers to Curves clubs for women to the exclusion of our other business ventures, such as Men's Curves, for example. Chain-wide sales from Curves clubs for women, which includes franchisees sales, totaled JPY 42.25 billion in the first half and was up 6.1% on a year-on-year basis. In terms of the breakdown, membership fees and dues incomes totaled JPY 31.29 billion, while merchandise sales came in at JPY 10.95 billion. This translated into JPY 18.19 billion in consolidated sales for CURVES HOLDINGS and JPY 3.38 billion in operating profit. I would now like to go over the results details for the first half of the ongoing fiscal year. First is the consolidated statement of income. As I just stated, we recorded JPY 18.19 billion in sales. The cost of sales stood at JPY 10.258 billion, bringing the gross profit to JPY 7.932 billion, and SG&A was JPY 4.551 billion. Putting these together, we recorded JPY 3.38 billion in operating profit, JPY 3.33 billion in ordinary profit and JPY 2.108 billion in net profit. Next is a comparison to the forecasts. Sales came in slightly below target with a difference versus the forecast of JPY 9 million. This difference is small, so sales were more or less in line with the plan. Membership remained steady and came in slightly above target. Here, we recorded a net year-on-year growth of 46,000 members. We implemented our monthly diet counseling promotion drive in December in the second quarter. This initiative takes place twice annually and is a recurring event at Curves, which involves our instructors offering dietary advice and recommending health products to club members they believe need these products. While the number of new product subscriptions was slightly below forecast, merchandise sales to members increased from JPY 10.5 billion to JPY 11 billion on a year-on-year basis. Additionally, during this time last fiscal year, in December 2023, we released a revamped lineup of protein products as well as Healthy Beauty, which is a new product lineup. The thing is these products vastly exceeded our expectations on account of tremendous customer loyalty. In other words, customers trust our clubs in our products and are thus likely to give new product offerings as try even if it's just for a couple of months. This caused a sharp spike in sales coinciding with these new product launches. Naturally, there is some attrition as some customers choose to discontinue their purchases, but this decrease has nevertheless been in line with company estimates. Going forward, we will continue to build upon our subscription base and grow sales. With a special focus on our new releases, Ultra Protein and Healthy Beauty. Operating profit came in JPY 355 million above the forecast, thanks, for example, to successful efforts to contain costs and SG&A expenses. The increase in the price of protein raw materials was less pronounced on account of a conservative foreign exchange risk forecast. We had initially expected a weaker yen, but gains against other currencies meant costs were slightly less pronounced than originally anticipated. In other words, while prices have indeed gone up, we have been able to contain costs within acceptable levels. This allowed us to post a significant operating profit overperformance. The same holds true for ordinary profit, which also saw an overperformance of JPY 315 million versus the forecast. In terms of the consolidated statement of income by region, domestic operations continue to account for the bulk of sales as we continue efforts to scale up the overseas business. I would now like to go over the composition of sales for the domestic segment. In broad strokes, income at CURVES HOLDINGS is divided into 2 types. The first is spot income consisting of onetime incomes from franchise agreement license fees and sales of new fitness equipment for new club openings. In short, this is a form of onetime income CURVES HOLDINGS receives every time a new club opens. The second type of income is base income, which consists of ongoing incomes proportional to the number of clubs and members. Base income contains 2 important income pillars, the first one being income from royalty fees and membership administrative fees, et cetera, received from franchisees, and this income is correlated to the number of members. This income accrues to us indirectly. The second pillar is merchandise sales to members. These are direct sales of things like protein by the CURVES Group to club members, meaning these sales accrue directly to CURVES HOLDINGS. We then pay a fee to the club where the sale originated. In terms of the breakdown of sales, we recorded JPY 486 million in spot income, while base income accounted for the majority of the income accrued and totaled JPY 17.418 billion. Within this JPY 17.418 billion, royalty fees, et cetera, represented JPY 3.675 billion, up 5.9% on a year-on-year basis. Merchandise sales to members generated JPY 11.014 billion, up 4.8% on a year-on-year basis. As I briefly touched upon earlier, membership fees and dues income and merchandise are recorded differently at the chain-wide sales and group sales levels. So allow me to clarify this dynamic. Allow me to direct your attention to the pie chart on the left, which shows the results for chain-wide sales, which totaled JPY 42.25 billion in the first half of the ongoing fiscal year. Of this, membership fees and dues income accounted for JPY 31.3 billion, which corresponds to 74.1% of the total, while merchandise sales accounted for JPY 11 billion or 25.9%. The breakdown of group sales is shown here on the right. The CURVES Group receives a portion of membership fees induced incomes generated by franchisees as per the franchise agreement. CURVES records this as royalty fee income, which accounts for JPY 3.68 billion of group sales or 20.2% of total group sales of JPY 18.19 billion. Now if you'll remember, CURVES directly retails merchandise to members, allowing us to record close to the full amount associated with these transactions. Merchandise sales flow directly to us, adding JPY 11 billion to the top line, corresponding to just over 60% of total group sales. Next is a year-on-year comparison for the consolidated statement of income. First half sales increased by JPY 1.16 billion on a year-on-year basis or 6.8%. This increase was thanks to an increase in royalty fee income resulting from growth in the membership count as well as an increase in merchandise sales. Next is a year-on-year comparison for operating profit. First half operating profit increased by JPY 570 million on a year-on-year basis or 20.3%. One of the contributing factors to this increase was an improvement of just under JPY 800 million in gross profit, which more than offset an increase of JPY 220 million in SG&A expenses. All in all, we registered an increase of JPY 570 million in operating profit. We actually increased the overall advertising spend within marketing. However, CURVES had to bear less in advertising costs, thanks to an increase in ad funds from franchisees, resulting from an increase in club membership. Another factor was higher effectiveness associated with our marketing campaigns. Next is the consolidated balance sheet statement. Current assets stood at JPY 15.437 billion on a year-on-year basis. Of this, cash and deposits stood at JPY 8.231 billion. Noncurrent assets stood at JPY 24.495 billion, down JPY 1.389 billion from the end of the August 2024 fiscal year. It should be noted that we carried out the acquisition of CURVES' headquarters in the United States in 2018 in the process acquiring goodwill and trademark rights, which account for the vast majority of the noncurrent assets held on our balance sheet. These fall under intangible assets, which totaled JPY 22.962 billion. Related to goodwill and trademark rights, we recorded JPY 771 million in depreciation in the first half. These are U.S. dollar-denominated assets, which means that foreign exchange fluctuations impact our group's consolidated results. The Japanese yen has regained some ground against the U.S. dollar recently and thus had a negative impact on our intangible asset balance of JPY 434 million. Amortization is fixed at $10 billion every year. And while this amount has been steadily going down on a U.S. dollar-denominated basis, the corresponding amount in Japanese yen fluctuates freely based on the prevailing exchange rate in the international ForEx market. All in all, total assets stood at JPY 39.9 billion. Total liabilities stood at JPY 19.603 billion, down approximately JPY 2.36 billion on a year-on-year basis. This decrease was primarily due to the repayment of JPY 1.645 billion in interest-bearing debt. Putting all of these factors together, we recorded JPY 20.329 billion in total net assets and JPY 14.421 billion in shareholders' equity. Next is the consolidated statement of cash flows. We recorded a cash inflow from operating activities of JPY 2.785 billion, up by just over JPY 1.6 billion on a year-on-year basis. One factor was an increase in net profit, but another factor, which I touched upon earlier, was the release of 2 new product lineups last fiscal year. This release led to higher inventory levels, which have now come back to normal. So this was a factor leading to an increase in cash flows from operating activities from an August 2024 fiscal year baseline. We recorded cash outflows of JPY 361 million from investing activities. as well as outflows of JPY 2.496 billion from financing activities, namely things like the payment of dividends, debt repayments, et cetera. Putting all of these together, we registered a net decrease in cash and cash equivalents of JPY 80 million in the first half. Lastly, cash and cash equivalents at the end of the period under review stood at JPY 7.921 billion. Allow me to skip forward to Page 21, skipping over the club and membership count trends, which we invite you to review at your convenience later. The dividend policy for the fiscal year ending August 2025 remains unchanged as we continue guiding for an annual dividend of JPY 17 per share. We will be paying an interim dividend of JPY 8 per share and are guiding for a year-end dividend of JPY 9 per share. I would now like to go over the business outline and updates for the second quarter. This slide outlines our strategies for the ongoing fiscal year ending in August 2025. Specifically, we seek to steadily grow club memberships through the execution of 3 annual attractive promotional campaigns, while also simultaneously leveraging improvements in customer satisfaction in order to keep attrition rates very low. Another strategy is the expansion of merchandise sales. Protein subscriptions rise proportionately to the increase in club membership count. Together with this, we will also be focusing on growing subscriptions to our new Healthy Beauty lineup, which we released last fiscal year. Another strategy is enhancing human capital, shown here as the second item from the top. We have been carrying out efforts within this scope for a number of years now, including throughout COVID. Here, we are carrying out the promotion of initiatives to enhance employee benefits, including for clubs operated by franchisees. The idea is to improve per employee productivity while also improving employee remuneration and benefits. And our strategy outlook includes a commitment to becoming the #1 in job satisfaction and benefits in the customer service industry across various regions over the next 3 to 5 years. We expect these efforts to allow us to secure qualified personnel amidst the ongoing and future labor shortages. This is a key strategy, and we are making progress on this front. I would now like to go over specific initiatives we carried out in the second quarter. The second quarter, which corresponds to the months of December, January and February, tends to have the lowest new membership numbers out of the entire fiscal year. In light of this, we do very little in terms of new membership drive campaigns and let new membership numbers fluctuate naturally. Instead, we prefer to focus on further raising service quality for members and reviewing club operations. These efforts have allowed us to keep attrition rates low and further lower the monthly attrition rate for this period to 2.2%. This underscores the success of our efforts to gradually reduce attrition. As I mentioned earlier, we offered personalized diet counseling to our members in December. Merchandise sales to members take place on a monthly subscription basis with the corresponding amount being automatically deducted from the customer's bank account every month, together with their monthly club membership dues and shipped to their homes. The total subscription rate is now 54.6%, and this number has grown over time. Specifically, this number combines the subscription rates for Ultra Protein and Healthy Beauty. I believe our efforts during the 3-month period under review were successful in raising satisfaction for existing members and building solid foundations for membership growth during the spring and summer. Our spring membership drive campaign started in March and is currently underway in April and results in terms of new membership acquisitions have been in line with company forecasts. I would now like to go over our annual Curves Food Drive initiative, which we started in 2007, shortly after the company's founding and through which we seek to help local communities. We enlist the help of Curves club members to bring nonperishable food items to our clubs so that these items can be donated to local welfare institutions nationwide. This initiative is always well received, especially amidst the current inflationary environment and fast rising food prices. It's a win-win situation for everyone, not just for the institutions that receive these items, but also for our members, many of whom are seniors who feel a sense of purpose and connection to the local community. And for Curves itself, since this is a good way to build customer loyalty while helping people. As you can see here at the bottom, about 138,000 donors participated in this year's food drive, donating about 168 metric tons of food items to 774 organizations and welfare institutions. We also continue growing our partnerships with local governments nationwide. Recently, we signed an agreement on partnership in regional comprehensive care with the government of Nakano Ward, Tokyo. Going forward, we'll be working together with local governments to hold health events in an attempt to promote health and welfare. Next is Men's Curves. I will be going over the details in a moment, but as it stands, 20 Men's Curves clubs are currently in operation. Results from new club openings in this category have been very encouraging and results at existing clubs also continue showing growth and improvement. Starting in the second half, we'll be accelerating our new club opening efforts. Next are our overseas segments. Our key markets overseas correspond to the 8 countries covered by Curves Europe B.V., the European franchise headquarters we acquired back in 2019. Curves has a footprint totaling 129 clubs operating primarily in Spain, Italy and the U.K. Membership and sales per club remain at a record high, significantly above pre-COVID levels. We acquired a number of clubs and operate these directly as part of our new business model to grow our club footprint. This model has been very successful. So we believe the time is now ripe to speed up new club openings in Europe. I would now like to go over the annual forecast. The annual forecast remain unchanged. Specifically, we are targeting JPY 38 billion in sales, JPY 6.3 billion in operating profit, JPY 6.25 billion in ordinary profit, JPY 4 billion in net profit, and lastly, a dividend of JPY 17 per share. However, in light of the strength of our club membership performance, we have raised the membership forecast from a range between 840,000 and 850,000 members to a range between 860,000 and 870,000 members. This concludes our overview of first half results. I would now like to outline Curve's future business strategy and our strengths. At the start of the ongoing fiscal year, we announced a number of financial commitments for the next 5 years. We are targeting a CAGR of at least 10% over the next 5 years for the metrics of operating profit, EBITDA and free cash flows. Naturally, our internal target at Curves is higher, but at any rate, the disclosed public commitment is at least 10%. Second, we are committed to maintaining a ROIC of 12% while aiming for 15%. The table shows our results for the various metrics. At the request of our shareholders, when announcing the full year earnings results for the fiscal year ending August 2025, we will announce the group's medium-term vision and business plan. In fact, we have already formulated a vision for 2030 and 2035 internally and are already in the process of carrying out a number of strategies within this scope. We will be further validating these strategies over the next 6 months so that we can present them to stakeholders in October. While I am not at liberty to disclose specific figures, I would like to use this opportunity here today to give you a bird's eye view of the basic policies and outlook that underlie our medium-term vision and business plan. Allow me to start with a broad outline of our future growth strategies. We positioned 2 key growth drivers over the next 5 to 10 years. Phase 1 focuses on growth to be achieved through our 30-minute fitness for Women Curves clubs, which are our core business, especially through existing clubs. We believe Phase 1 will allow us to unlock significant growth over the next 3 to 5 years. Concurrently, Phase 2 is about the expansion of the Men's Curves business and of a new brand, which we will be discussing in a moment. By growing this new brand alongside our other operations, over the next 3 to 5 years, we hope to unlock growth drivers in new businesses, thus achieving mid- to long-term growth. Specifically, we are aiming for around 20 to 30 new club openings for our standard Curves 30-minute fitness for women clubs, while also working to increase memberships and merchandise sales to members at existing clubs. To this, we add Men's Curves clubs and the launch and multi-location expansion of our new brand X, which we will start carrying out in earnest next fiscal year. In summary, we will be unlocking mid- to long-term growth through the execution of these strategies in the manner outlined here. Allow me to start by first outlining our assessment of the future potential in terms of the possible room for growth of existing clubs. We believe that our existing club footprint has the potential to increase the number of memberships by more than 200,000. This translates into an annual increase of slightly below JPY 15 billion in chain-wide sales and slightly above JPY 1.5 billion in our sales, including annual royalty fees. We also believe there is room for growth in terms of merchandise sales to members, which is our second pillar. Specifically, we believe we can further grow merchandise sales to members by between JPY 10 billion and JPY 15 billion, exclusively from a sales increase resulting from an increase in membership and subscription rates only with existing products. Putting all of this together, we believe there is still room for further growth between JPY 25 billion and JPY 30 billion in chain-wide sales and over JPY 16 billion in CURVES HOLDINGS consolidated net sales. Allow me to share with you some of the reasons we believe we can unlock this much value. Let me start with a comparison of performance per club between our 76 corporate-owned clubs and 1,870 clubs operated by CURVES franchisees. The location criteria for opening new clubs are very similar between corporate-owned clubs and clubs operated by franchisees. Corporate-owned clubs boast an average of 554 members. And what's more, we believe there is still room for growth here as we believe we can grow this number to close to 600 members. On the other hand, clubs operated by franchisees have an average of 431 members. These are profitable operations on the part of CURVES franchisees, but a gap of over 100 members remains between these clubs and our corporate-owned clubs. As such, there is still room for growth here as franchisees bridge this gap. The same holds true for monthly merchandise sales as there is a gap of JPY 380,000 between our corporate-owned clubs and clubs operated by franchisees. We sell the exact same products using the exact same methods. So we believe there is room to further improve franchisee results. We grew our membership count by just over 50,000 over the past year. Of this, existing clubs accounted for approximately 43,000 or around 84%. This trend is even more pronounced when it comes to merchandise sales to members as we have been able to grow merchandise sales at existing clubs by increasing the percentage of club members who make use of our subscription plans. We will, therefore, continue employing these strategies to grow the membership count and provide support and counseling to our members. In doing so, we expect to be able to continue to grow sales by further increasing our membership count and merchandise sales to members at existing clubs. I would now like to talk about our merchandise sales business. As you are aware, we sell 2 key product lines in our merchandise sales business, Ultra Protein, a protein supplement line and Healthy Beauty. Released in December 2023, a single daily serving of our proprietary Healthy Beauty product helps members achieve a well-balanced diet. We have identified 3 strengths in our merchandise sales business. First, we have very close touch points with our customers, which allow us to develop original products that solve customers' negative issues and feelings. In areas such as health and everyday dietary issues. We leverage this close relationship we have with our customers in the form of continuous and extensive R&D efforts towards the development of original products. Because of this, our protein formulation is nothing like the product you can buy at your local drug store or online. Rather, our formulation was designed specifically to address dietary concerns and other concerns by our customer base, which consists primarily of women in their 50s, 60s and 70s. Our products are formulated specifically to engineer a daily habit, allowing our customers to become healthier. This is our focus, and we leverage our accumulated knowledge and expertise toward the use of proprietary compounds, flavorings and serving sizes. We released Ultra Protein in December 2023 as an improved formulation of our previous offering. This improved version uses active ingredients to enhance the efficacy of muscle development without requiring a further increase in workout intensity and frequency. Due to its effectiveness, this product has been very well received by our customers. The same holds true for Healthy Beauty, which we developed over a 3-year period after carefully analyzing our customers' diets, which once again are mostly people in the 50s and 60s, one meal at a time. We leverage this data and our expertise to solve our customers' negative issues and feelings. And this continuous development of original products is one of the strengths of this business. The second strength is a subscription system for healthy lifestyles. Our customers benefit from our subscription system in that they know they will receive the products they need in the mail every month and which offer an easy and convenient daily habit to improve their health. Also, a benefit to franchisees is that they don't need to hold inventories, which effectively means they can offer these merchandise subscriptions with effectively 0 risk. Lastly, CURVES Group benefits from the subscription model, which boasts very low attrition rates. Another important reason attrition rates are so low is regular personalized diet counseling by instructors. In fact, merchandise subscription members have access to monthly diet counseling services, so members who forget to take their supplements can obtain advice from instructors and consult with instructors to solve any negative issues they might have. We do this, and we also have our monthly diet counseling promotion drives held twice a year, during which we open diet counseling to all club members and give them an opportunity to review their dietary habits. In summary, high-quality personalized service allows us to carry out the sales and follow-up, allowing for a steady increase in subscriptions and lower attrition. Let us now have a look at the quarterly merchandise sales figures going back to the company's inception. We started selling protein products in December of 2010 and a growing membership count and subscription rates have allowed us to steadily increase sales over time. We then started selling Super Protein in December 2017 as our second protein formulation, and this allowed us to take sales to the next level. Sales then stabilized. And in December 2023, we released Ultra Protein as an improved version of our previous protein products and Healthy Beauty as a completely new product offering. We have just shown you the sales trends, but perhaps more illustrative are the trends in the subscription rate of subscription products, which are represented in this graph. After we started selling our first protein product, subscription rates gradually rose from around 10% of our overall membership count to eventually reach around 30%. This number then plateaued a bit, and that's when we launched our new Super Protein offering. This catalyzed subscription figures, which rose by around 10 percentage points to around 40%. Between 40% and 45% then became the new norm, and it was at this juncture that we started the sale of our new Ultra Protein and Healthy Beauty products in December 2023. The subscription rate shot up to 60% immediately upon the release of these products, but this number has now stabilized at around 55% to 56%. We expect protein subscription rates to increase further and to reach close to 50% and for protein sales to continue growing in proportion to the increase in membership count. Subscription rates for Healthy Beauty are still just above the 10% line. Customer feedback has been fantastic. So we would like to expand the target customer profile and grow the subscription rate in the second half of the ongoing fiscal year, driving merchandise sales, such as our strategy. Lastly, allow me to approach our growth strategy for existing Curves clubs from a different vantage point. Earlier, I stated that we believe there is still room for growth, namely JPY 30 billion in chain-wide sales and JPY 16.5 billion in consolidated net sales. Another way of stating this is saying that we will be increasing the number of members and merchandise sales per club. What's more, this is possible even without increasing clubs human resources at both corporate-owned clubs and clubs operated by franchisees. Quite the opposite. Every year, we have been able to reduce total working hours, adopting a high productivity operation method, allowing us to reduce the number of personnel hours deployed. We honed this method and carried out various forms of DX investment over the years, even during COVID, fully digitizing a variety of miscellaneous club operations and thus making it possible for instructors to devote more of their time to helping our customers. Going forward, we intend to continue carrying out DX investments to allow us to reap further improvements in operational productivity. These effects translate into improvements in labor productivity and higher added value per person. To wit, labor productivity is now 10 points higher than it was pre-COVID with significant improvements in added value per person. We funnel some of this higher productivity back to employees in the form of salary raises, which we are currently carrying out nationwide, including at clubs operated by franchisees. CURVES offers superior salaries and benefits nationwide, and this has allowed us to attract highly qualified talent. As I said, this allows us to funnel some of this extra productivity to human capital investment, translating into higher wages, better compensation and more training. On the topic of training, we significantly improved our digital employee training system during COVID. This system now allows employees to acquire specific skills in relatively short periods of time. In summary, these various factors allow for further improvement in service quality and customer satisfaction, which in turn, creates a valuable positive feedback loop. A key strategy for companies in the customer service industry, such as ourselves, is to focus on leveraging improvement in labor productivity to offer better employee benefits, thus attracting talent. Taking care of the demand side is vital as is working on the supply side as well by securing talented employees. We recognize this, which is why we are implementing the strategy outlined here. Against this backdrop, we made a conscious decision to adopt a strategy of growing our market share by growing membership count and sales at existing clubs, even while holding back slightly in terms of new club openings for our Curves for women brand. Within this scope, we continue carrying out a variety of strategic growth investments, such as enhancing our online fitness programs, et cetera. I would now like to go over our new businesses. Circling back to what I said earlier, existing Men's Curves clubs have been showing a gradual results improvement over time. Specifically, the membership count is up by over 18% on a year-on-year basis. New member sign-ups increased by 35%, and there has been a steady decrease in the membership attrition rate. In light of these, we believe it makes sense to start thinking about rapidly expanding the club footprint. We now have in place a business model allowing us to do just that, and we are already in the process of opening between 5 and 7 new clubs in the second half of the ongoing fiscal year. These initiatives will then go into high gear starting in the fiscal year ending August 2026 as we're guiding for 20 new club openings every year. Second, we have what we have termed our new brand X. We use this term because we are not yet at liberty to discuss the details, so we ask for your understanding on this front. The key takeaway here is that we have already launched a new business following in the footsteps of Men's Curves. Specifically, we started to deploy a new health care facility brand whose market is completely different from Curves and Men's Curves. We will be discussing the specifics of this business during CURVES HOLDINGS business plan in October of this year. We started limited scale franchise deployment of this brand in July of 2024. In other words, we offered a limited pilot to our best franchisees nationwide, which have so far opened 25 facilities. The deployment of this new business has been taking place more or less in line with company estimates with another 10 to 12 facilities already in the works over the remainder of the ongoing fiscal year. Consequently, we expect the number of facilities to reach 35 to 37 by August 31, 2025. Starting next year, we are guiding for between 35 and 45 new openings every year. In summary, in addition to growing our Curves brand for women, our medium- to long-term growth strategy over the next 5 to 10 years now calls for a multiple brand strategy. The idea is to have competition strategies without competing, which is something we have successfully executed for our Curves brand for women and apply this to Men's Curves and our new brand X. Our business model consists of clearly defining new uncultivated markets our competitors are yet to plant their flag on and offer high-quality services to customers to maximize LTV. We have very specific customer profiles, meaning we truly understand the needs of our customer base and can therefore, deploy marketing efforts leveraging very specific customer insights, allowing us to create new markets. Lastly, once we have reached a certain threshold in terms of the number of clubs and membership count, we will be deploying strategic merchandise offerings to solve our customers' health-related issues and concerns in a vein similar to our protein offering that Curves for women. Furthermore, we already have in place a foundation allowing for the rapid expansion of our club and facility footprint across our various brands. Circling back to what I said earlier, we tapped into our existing franchisee network and entrusted top franchisees nationwide with the opening of facilities under our new brand X banner. The number has already risen to 25. We boast 366 locally based franchisees, of which over 200 have tremendous appetite for business expansion and have already voiced their desire to join us in growing our new business. Additionally, we also boast a roster of 7,000 highly motivated instructors with specific skill sets built over the past 20 years through our Curves business. We'll be leveraging this foundation to deliver sustained growth for Curves and growth for our new businesses. Starting in 2025, we believe the health market will see a significant expansion. 50 million people out of Japan's total population already fall into the 50 to 79 age bracket. What's more, while Japan's population is on a declining trend, population numbers within this age bracket are expected to remain stable. Age-wise, the 2 baby boomer generations are now each starting to deal with their own respective health challenges, paving the way for a significant expansion in terms of new health markets. In fact, starting around last year, we are seeing significant growth in new member registration at Curves from members in the second baby boomer generation bracket. This is direct proof of this expansion of the health market. Last, are our operations overseas in Europe. As I stated earlier, over the years and through the pandemic, membership per club has increased by 100 from a baseline of 220 immediately after acquisition. We have seen a strong increase in profitability, and we have plans to further accelerate franchise and club expansion in Europe as well in the second half of 2025 and into 2026. This concludes my presentation. Thank you for your time today.